First-Half 2018 Results July 26, 2018
1. Introduction Hubert Sagnières Chairman and Chief Executive Officer First-Half 2018 Results 2
Further Progress towards our Core Ambition: Eradicating Poor Vision Within One Generation Leveraging 3 pillars: Awareness, Inclusive Business and Strategic Giving First-Half 2018 Results 1. Introduction 3
2. First-Half 2018 Results Laurent Vacherot President and Chief Operating Officer First-Half 2018 Results 4
Delivering a Strong H1 Good sales momentum Key brands driving growth across all divisions Robust growth in the US Strong online sales China and Brazil fuel fast-growing markets (1) expansion Sound financial performance Increase in gross margin driven by innovation Accelerated investments in fast-growing channels, categories and consumer segments Deleveraging Net debt reaching 1.96bn vs. 2.24bn in H1 2017 (1) Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America. All divisions combined First-Half 2018 Results 2. First-Half 2018 Results 5
First-Half 2018 Revenue Up 4.4% Excluding the Currency Effect millions 154 +4.0% 17 +0.4% -304 Projected impact roughly neutral for H2 and of c.-4.5% for FY based on end-of-june FX rates -7.9% 3,859 3,726 +4.4% -3.5% H1 2017 Revenue (1) Like-for-like growth Bolt-on acquisitions (2) Currency effect H1 2018 Revenue (1) The group has applied IFRS 15 related to revenue recognition from January 1 st, 2018. H1 2017 revenue has been restated accordingly, with a negative impact of 50m. (2) Local acquisitions or partnerships First-Half 2018 Results 2. First-Half 2018 Results 6
All Divisions and Regions Accelerating in Q2 Lik e-for-lik e revenue growth Q1 2018 Q2 2018 H1 2018 Lenses & Optical Instruments +2.9% +4.2% +3.6% North America +3.4% +4.5% +4.0% Europe +0.7% +1.1% +0.9% Asia/Pacific/Middle East/Africa +6.2% +6.9% +6.6% Latin America +1.2% +9.2% +5.1% Sunglasses & Readers +6.6% +9.5% +8.1% Equipment -3.1% +4.2% +0.9% TOTAL +3.2% +4.8% +4.0% Robust Lens business, led by Success of new products Alliances and Essilor Experts in the US Confirmed rebound in Brazil Good momentum in China and Japan Sunglasses & Readers division Xiamen Yarui Optical (Bolon ) back on track First-Half 2018 Results 2. First-Half 2018 Results 7
First-Half 2018 Revenue by Division Reported revenue in millions H1 2018 H1 2017 (1) % Change Like-for-like At constant exchange rates Reported Lenses & Optical Instruments 3,211 3,333 +3.6% +4.1% -3.7% North America 1,386 1,472 +4.0% +4.7% -5.8% Europe 1,004 1,011 +0.9% +1.0% -0.6% Asia/Pacific/Middle East/Africa 596 603 +6.6% +6.9% -1.3% Latin America 225 247 +5.1% +6.1% -8.7% Sunglasses & Readers 413 417 +8.1% +8.1% -1.1% Equipment 102 109 +0.9% +0.9% -6.8% TOTAL 3,726 3,859 +4.0% +4.4% -3.5% Fast-Growing Countries (2) 914 929 +8,2% +8.5% -1.6% Mature Countries 2,812 2,930 +2.7% +3.1% -4.0% (1) The group has applied IFRS 15 related to revenue recognition from January 1 st, 2018. H1 2017 revenue has been restated accordingly, with a negative impact of 50m. (2) Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America. All divisions combined. First-Half 2018 Results 2. First-Half 2018 Results 8
Resuming the Acquisition Strategy Combined Annual Revenue of c. 27m North America 1 Cal Coast Ophthalmic Instruments Aohssa Asia/Pacific/ Middle East/Africa 1 Mat Viet & Hao Phat Optica Popular Latin America 2 First-Half 2018 Results 2. First-Half 2018 Results 9
Gross Margin Expansion millions H1 2018 H1 2017 Adjusted (2) Adjusted (2)(3) % Change % Change excl. currency Revenue 3,726 3,859-3.5% 4.4% Gross profit 2,211 2,264-2.4% 5.0% A % of revenue 59.3% 58.7% - Operating expenses (1,527) (1,546) -1.2% B % of revenue (41.0%) (40.0%) - Contribution from operations (1) 684 718-4.8% 2.4% % of revenue 18.4% 18.6% - Other income (expenses), net (54) (51) - Operating profit 630 667-5.5% Financial income (expense), net (30) (32) - Income tax (133) (155) - Effective tax rate 22.2% 24.4% - Net profit 467 480-2.6% 4.6% Minority interests (46) (49) - Profit attributable to equity holders 421 431-2.4% C Earnings per share (in ) 1.93 1.99-3.0% 4.5% A B C Innovation Product mix Accelerated investments in future growth EPS growing in line with sales (1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses) (2) Adjusted for expenses due to the proposed combination with Luxottica (in the amount of 47m on operating profit and 72m on group net profit in 2018 ) (3) The group has applied IFRS 15 related to revenue recognition from January 1 st, 2018. H1 2017 accounts have been restated accordingly, with impacts of -50m and -3m on revenue and contribution from operations, respectively. First-Half 2018 Results 2. First-Half 2018 Results 10
Healthy Free Cash Flow (1) Generation millions Deleveraging 246 Change in WCR Net debt in millions Operating cash flow (excl. change in WCR) 659 150 Capital expenditure 2,172 2,244 1,961 Capital increase 1 +263 386 Dividends Reported change in net debt 301 167 Net financial investments Foreign exchange and others (2) (1) Free cash flow = Net cash from operating activities less change in WCR and capital expenditure / (2) Including 21m of foreign exchange impact. 12 H1 2016 H1 2017 H1 2018 First-Half 2018 Results 2. First-Half 2018 Results 11
3. Outlook Laurent Vacherot President and Chief Operating Officer First-Half 2018 Results 12
Outlook for H2 Delivering on our mission: accelerating initiatives in all regions and divisions Sustained momentum in the Lens business Innovation and Varilux, Transitions & Crizal brands ECP s programs in the US Fast-growing markets (1) E-commerce Targeting mid-single digit growth in Sunglasses & Readers Increased contribution from acquisitions to revenue Chief Marketing Officer and Chief R&D Officer joining the Management Committee Finalization of the Essilor and Luxottica proposed combination (1) Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America. All divisions combined First-Half 2018 Results 3. Outlook 13
Outlook for 2018 Like-for-like Revenue Growth Around 4% Contribution from Operations (1) as a percentage of revenue 18.3% (2) (1) Contribution from operations = Revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses). (2) Excluding any new strategic acquisition(s). First-Half 2018 Results 3. Outlook 14
Questions & Answers
4. Appendices First-Half 2018 Results 16
Application of IFRS 15 and H1 2018 Adjustments The group has applied IFRS 15 related to revenue recognition from January 1 st, 2018 H1 2017 accounts have been restated accordingly: - 50m on revenue - 3m on contribution from operations (1) H1 2018 accounts were adjusted for non-recurring items related to the proposed combination with Luxottica Transaction costs: 14 million Share based payments costs: 33 million Tax impact related to the change in the future settlement of existing share plans : 28m (1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses) First-Half 2018 Results 4. Appendices 17
Reported P&L Statement after application of IFRS 15 millions H1 2018 H1 2017 (2) % Change Revenue 3,726 3,859-3.5% Gross profit 2,211 2,264-2.4% % of revenue 59.3% 58.7% - Contribution from operations (1) 684 717-4.6% % of revenue 18.4% 18.6% - Operating profit 583 608-4.0% Net profit 396 438-9.6% Net profit attributable to equity holders of Essilor International 349 389-10.0% % of revenue 9.4% 10.1% - Earnings per share (in ) 1.60 1.80-10.8% (1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses) (2) The group has applied IFRS 15 related to revenue recognition from January 1 st, 2018. H1 2017 accounts have been restated accordingly, with impacts of -50m and -3m on revenue and contribution from operations, respectively. First-Half 2018 Results 4. Appendices 18
Reconciliation from Adjusted to Reported Accounts millions H1 2018 Adjusted Items adjusted H1 2018 Reported Revenue 3,726-3,726 Contribution from operations (1) 684-684 Other income (expense) (54) (47) (101) Operating profit 630 (47) 583 Income tax (133) (24) (157) Net profit 467 (71) 396 Net profit attributable to equity holders of Essilor International 421 (72) 349 Earnings per share 1.93 (0.33) 1.60 The H1 2018 accounts are adjusted for items related to the proposed combination with Luxottica including 47 million at the other income (expense) level, leading to an adjusted operating profit that is 47 million higher. After taking into account tax effects ( 24 million), the adjusted net profit attributable to equity holders of Essilor International amounts to 421 million. (1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses) First-Half 2018 Results 4. Appendices 19